RBNZ surprises keep coming - TDS

Research Team at TDS, suggests that the RBNZ surprises keep coming, this morning publishing a fresh set of macroprudential tools, in a timetable that now appears rushed and brought forward compared with the ‘in the coming months’ tone of RBNZ Dep Gov Spencer’s speech on July 7th. 

Key Quotes

“The RBNZ stated that it is “proposing changes to loan-to-value restrictions (LVRs) to further mitigate risks to financial stability arising from the current boom in house prices.”  Under the new restrictions, 1) no more than 5% of bank lending to residential property investors could exceed a Loan to valuation ratio of 60%; 2)  no more than 10% of lending to owner-occupiers would be permitted with an LVR greater than 80%; 3) Construction of new dwellings would continue to be exempt from LVR restrictions.

The consultation period ends 10th August, the day before the RBNZ meeting and these new restrictions would take effect from 1st Sep 2016, removing the distinction between lending in Auckland and the rest of the country. The RBNZ also issued a Bulletin paper on ‘Financial stability risks from housing market cycles’ today, supporting why macroprudential actions may be justified.”